Bill Bartmann, who has been collecting debts for decades, says he can help Oklahoma’s storm victims who are dealing with creditors.

BY BRIANNA BAILEY bbailey@opubco.com • Published: July 23, 2013

It was all downhill for Jane Bailey’s credit score after she let her nephew — and eventually his girlfriend and her six dogs — move in with her at her former home in San Gabriel, Calif.

Now she estimates her nephew owes her about $200,000 for everything from paying for her nephew’s gas card, his divorce and even trying to help him get into the jewelry business.

“I maxed out all of my credit cards — I refinanced my house,” said Bailey, a retired schoolteacher who let her nephew move in after her husband died.

Now living in Oklahoma City with a friend and sharing expenses while she gets back on her feet, Bailey says she is getting help paying down her debt from the Tulsa-based debt collection CFS2.

“I took my nephew at his word when he said he would pay me back — now that’s sort of what CFS2 is doing for me,” said.

When Bailey told her caseworker at CFS2 she was spending more than $40 every month on vitamins for her 18-year-old cat, they helped her find the products for cheaper so she could afford to pay more on her credit card bills. The company also called her credit card companies to negotiate down the balance on what she owes, all in order to help Bailey repay the debt that CFS2 bought from her other creditors.

Founded by Tulsa business man Bill Bartmann, CFS2 hopes to change the way debt collectors operate by working with a debtor to pay down debt, even helping them improve their resume or land a job interview. The company has even helped people gain access to discounted medical care or home repairs to help them repay their debt.

Now Bartmann wants to extend CFS2′s services to victims of Oklahoma’s May tornadoes — free of charge. People whose homes were damaged in the storms can contact the company for help with their bills. CFS2 will attempt to work with the person’s creditors to put a temporary halt to payments on any of the persons’ outstanding debts and keep their credit from being damaged.

“I already have the staff and the structure set up to do it, so why not?” Bartmann said. “I’m doing it because it’s the right thing to do.”

Bartmann also hopes to eventually extend the services to victims of future natural disasters across the country.

Over his more than 20 years in the debt collection industry, Bartmann estimates he has bought up about $15 billion in bad debt, typically for pennies on the dollar.

While other debt collectors wear people down with constant phone calls and threats of legal action against a debtor to make them settle up, Bartmann’s company has a policy of never suing to recover money.

“When I got into this business, people thought you had to yell at people or they would never pay you.”

He’s become an advocate for reforms in the debt-collection industry over the years, giving talks at the White House and before Congress and the Consumer Financial Protection Bureau.

“I have found that 90 percent of people want to repay what they owe; they want to settle up,” Bartmann said.

Oklahomans who have been affected by tornadoes in the state can call a hotline CFS2 has established at (877) 772-0951 to arrange for a customized forbearance program to ensure that negative information is not reported against them while they recover from the storms.

Hi, I'm Bill Bartmann and I am on a mission to reform the debt collection industry in America. Please join with me as we bring a petition to Washington D.C., and make Congress close all the legal loopholes in debt collection practices. It's time to stop these debt collection abuses and stop these criminals. Join with me! Sign the petition today! http://stopthesecriminals.com/petition

It’s essentially the same “robo-signing” problem that took place in the mortgage arena a few years ago, when lenders signed off on foreclosure documents without sufficiently reviewing them. Customers are being sued, typically by people who buy delinquent credit card debt from the bank. But because the collection agency frequently relies on incomplete information from the banks when signing off on an affidavit, it may sue an innocent person who has the same name as the debtor. Or it may sue someone for debts that have expired under the statute of limitations or have been discharged in bankruptcy.

Thirteen state attorneys general allege that banks, including Bank of America, JPMorgan Chase, Citigroup and Wells Fargo, sold loans to debt buyers with sloppy practices. Separately, the California attorney general filed suit against Chase for debt-collection abuses against as many as 100,000 customers. The Office of the Comp­troller of the Currency is also investigating Chase. For the past two years, the Consumer Financial Protection Bureau has been collecting data on this issue. I’ve never seen a problem attacked by so many groups simultaneously. It’s a big deal, and it’ll hit the banks’ bottom line.

How many people might be affected?

Judging by the volume of lawsuits and reports on how many of them rely on flawed information, I think the number of customers affected could reach the tens of millions.

How could so many faulty documents find their way into lawsuits?

It has become easier and less expensive for lawyers to sue thousands of people at once. Thus debt collectors found that they could afford to sue all of their debtors, even those with small balances.

What are the signs that you’re a victim?

You may get a letter from a lawyer or your wages might be garnished. Pull your credit reports at least once a year to spot problems — errors in your name or address, a collection item that you don’t owe or that has expired. If you’re improperly sued, contact an attorney. To file a complaint, you can call the Better Business Bureau and your state attorney general’s consumer protection office. Or submit a debt-collection complaint on the CFPB’s Web site (www.consumerfinance.gov/complaint/)

Hi, I'm Bill Bartmann and I am on a mission to reform the debt collection industry in America. Please join with me as we bring a petition to Washington D.C., and make Congress close all the legal loopholes in debt collection practices. It's time to stop these debt collection abuses and stop these criminals. Join with me! Sign the petition today! http://stopthesecriminals.com/petition

Debt collectors are notorious for their bully tactics — the endless barrage of phone calls, the threats of litigation, you name it. But it doesn’t have to be this way. CFS2, for example, uses a much gentler (and more successful) approach to collecting its monies: kindness. Instead of harassing debtors, the firm helps them find what they need most: more money and better jobs. By writing their résumés, prepping them for interviews, and shepherding them through the application process, the company has managed to bring in twice what most other debt collection agencies can collect. Maybe virtue is more than its own reward.

Hi, I'm Bill Bartmann and I am on a mission to reform the debt collection industry in America. Please join with me as we bring a petition to Washington D.C., and make Congress close all the legal loopholes in debt collection practices. It's time to stop these debt collection abuses and stop these criminals. Join with me! Sign the petition today! http://stopthesecriminals.com/petition

NEW YORK (TheStreet) — Big banks are facing unprecedented pressure to rein in the behavior of buyers of their charged-off credit card debt. This pressure is coming from two sources, one well known and one almost no one has talked about — yet — and that will put fear into the heart of every banker who hears them: the CFPB and RICO.

The Consumer Financial Protection Bureau is the nation’s protector of consumers in all matters financial. An outgrowth of the financial crisis beginning in 2008, the CFPB is charged specifically with supervision and regulation of two interrelated industries — banking and private debt collection. This is the first time these two industries have been supervised by the same agency.

The intersection of banking and private debt collection rises when a bank sells defaulted credit card loans. The sale of these loans is common and serves a real purpose for the bank. According to the Nilson Report, last year the banking industry sold $51 billion in delinquent credit card loans. Those loan sales produced approximately $5 billion in recoveries for the banking industry.

The CFPB sent a message recently that it plans to hold banks responsible for the actions of third parties, including those who buy delinquent loans. The agency has promised new regulations and enforcement actions in an effort to encourage major banks to reform their historical practices of selling charged-off debt to companies who file millions of lawsuits each year based on inadequate supporting information.

This practice, called robo-signing, gained infamy during the past few years’ mortgage loan crisis, costing the banking industry more than $35 billion in fines and penalties from the AGs and the Office of the Comptroller of the Currency. Essentially, the debt buying company, now the owner of the debt, files a lawsuit against a consumer and swears an oath to the court that all the claims made in the petition are true and accurate — although there is frequently no documentation to support the affidavit. More than 90% of the time, the debt buyer is relying purely upon a string of digital data and has no proof of the facts of the debt.

Yet robo-signing continues unabated. Why? Because it is so highly profitable for the company who bought the debt from the bank.

“The wholesale transgressions of the debt collection industry present the most significant consumer protection issue of the decade,” said Drew Edmonson, former attorney general of Oklahoma, in a recent letter to California Attorney General Kamala Harris.

Edmonson is on target. Robo-signing in debt buyer credit card litigation far exceeds the scope of the mortgage robo-signing that drew so much attention. No one knows for sure how many mortgage foreclosure lawsuits were robo-signed — the best guess is somewhere around 5 million, an injustice for certain. But over that same period there were about 25 million robo-signed credit card lawsuits — five times the robo-signed mortgage foreclosures that created such scandal. And the problem of robo-signed credit card litigation is growing; there will be about 15 million so far this year alone.

The CFPB has made its intentions very clear. Likewise, the state attorneys general who previously fined banks tens of millions of dollars for mortgage robo-signing have announced a new multi-state action against those same banks for credit card robo-signing abuses. It is highly likely that the AG settlement with the banks this time around will be much larger — some expect $50 billion or more.

If banks think the CFPB and AGs are scary — and they do — they should be terrified of RICO. The Racketeer Influenced and Corrupt Organizations Act was intended as a tool to fight organized crime but turns out to have far wider implications. RICO makes illegal any conspiracy to commit a crime. If a bank sells bad debts to a debt buyer who has a history of robo-signing — which is itself a fraud — logically there exists a conspiracy. The bank becomes a party to the conspiracy because they know of the debt buyers’ practice of robo-signing. The result is RICO. This very argument was the subject matter of a recent law review article.

No bank can withstand a RICO conviction. The damage to the bank’s reputation would be irreparable — a cost far exceeding the treble damages and significant monetary penalties that would be assessed.

There is a simple and elegant solution to this risk of CFPB action and exposure to RICO: Banks should sell their delinquent loans only to those debt-buying companies who have pledged not to use litigation as a collection technique — there are plenty of them and they are capable. If the debt buyer does not sue, there can be no robo-suing, no concerns about inadequate documentation and no vicarious liability for the seller.

Hi, I'm Bill Bartmann and I am on a mission to reform the debt collection industry in America. Please join with me as we bring a petition to Washington D.C., and make Congress close all the legal loopholes in debt collection practices. It's time to stop these debt collection abuses and stop these criminals. Join with me! Sign the petition today! http://stopthesecriminals.com/petition

As you can imagine, I was thrilled to work with Harvard again. Harvard Business Review did a case study on the original CFS back in 1999 and now Harvard Business Review is writing about our new business model. We are changing the industry and helping thousands of Americans get back on their feet.

Bill Bartmann, CEO of debt collection company CFS2, does things a little differently. Instead of just calling, hounding, and suing debtors to pay what they owe, he calls them “customers” and provides them with free job-search services, such as resume help and interview prep.

Perhaps the reason Bartmann runs his company differently is because he himself has never shied away from living life differently. A high school dropout who later put himself through college working at a hog slaughterhouse, he found himself $1 million in debt himself after his first business collapsed. He clawed his way back up by building CFS, the subject of this HBS case study — but then, that too, imploded. Now he’s back (again), and doing things differently (again). What follows are edited excerpts of our conversation.

What’s it like running a debt collection company that’s so different from the rest of the industry?
It’s a little bit like telling everyone that the world is round, when they’re still in that flat-earth society. The debt collection industry believes that you have to beat people up to get money out of them — that’s in their DNA. We all know pleasure and pain are what motivate people, but the debt collection industry has only ever focused on pain. In our company, we’ve reversed that, and quite frankly it works wonderfully.

Maybe some of the people we work with made bad decisions, and maybe some you wouldn’t want to hang out with, but most of them are people like you and me, and they just got swept up in an economic tsunami that literally knocked the blocks out from under them.

You’ve said the idea came from your employees. How did that happen?

Well, there was this emphasis on litigation by the debt collection industry. We saw that as a train wreck. The banks that sell these loans have so much reputational skin in the game, when the banks become aware of how exposed they are by the tactics of these agencies, we believe the banks will want to change course. So we had decided that we really needed to focus on the pleasure principle.

We knew we needed to be more than just nice, but we didn’t know exactly what to do. I went to my employees. I said, “How do we create pleasure for the customer?” This was my plea to 120 employees at a company-wide meeting. What can we do to have them respect us, like us, to “friend them,” for lack of a better term, to want to work with us? So ideas started coming from the audience. Some people suggested raise their FICO score, or help them get their credit back, get a credit card. So then we went to test these ideas with our customers: did they want these things? The customers did not. The customers said, excuse the French, “We want the damn phone to quit ringing.” It was an epiphany. They didn’t want the things we thought they wanted. Maslow’s hierarchy? These people were not even on the bottom rung.

So we huddled everybody together again. They said, “The number one problem we hear from customers is that they don’t have enough money to pay their bills.” We realized if we help them get a better job, they’ll have more money. It’s one of those really simple things where you wonder, “Why didn’t I think of that earlier?”

So how did you take that idea and actually put it into practice? We tried a number of different approaches which didn’t work early on. It was mostly advice and suggestions, things of that nature. So we huddled again. And then an employee said, “We’re going to have to do it for them. They can’t do the heavy lifting themselves — they’re so beat down they have no get-up-and-go left.” So now we get the customer on the phone, get their info, write a resume for them. We realized we were on to something, and we said, “OK, let’s do more of that.” We start with a petri dish and if something doesn’t work, we don’t do it anymore. If something does work, we replicate it.

So tell me about that. How did you take what you’d learned about the resumes and replicate it?

We started doing job interview prep. We put customers on Skype before their interviews, show them what to wear, do mock interviews.

Then we said, “We’ve got to do more than hope they hear about a job, let’s help them find one.” So we created a job network. We take their resume and look for openings that fit their skill set. We’d find one, call up the customer, and ask them if it’s of interest. Then we’d fill out the application. We’d schedule an interview. And then we would do the mock interview. And then at 8:00 am on the morning of the interview, we call our customer to get them out of bed.

Our success rate has been phenomenal.

How do other companies that are hiring your customers see this? Do they know they’re being helped by a debt collection company?

It never comes up. The companies do not know that’s how that person ended up there, and nobody really cares where the application comes from.

Were there any surprises you ran into, in implementing some of these ideas?

Not all our customers have the same buttons to hit. We’re all different. So one of my employees said, “Why are we trying to figure out what they want; why don’t we just ask them what they need?”

Early on, requests came in for food stamps, child care, a new hot water heater, fixing a leaky roof, a new wheelchair. Someone wanted a tree in his backyard cut down. Someone needed a casket for their father’s funeral. And we said, “OK, we’ll do that.”

We’ve now delivered 203 services that are just as eclectic as you could imagine. In the case of the leaky roof, we called up Habitat for Humanity. The guy who needed a water heater, we called up Salvation Army. Cutting a tree down in the backyard, that was even more simple. We now keep a database of 6,000 agencies around the United States so that whenever we have a customer that wants or needs anything we can find someone who cares about that customer. There are organizations that care about every race, religion, gender, military service, and so on. We care about one person, the customer. So find out everything about who our customer really is so that we can target the organizations that care about some aspect of who they are.

I know you said the point wasn’t to have it make money, but I read that you actually do make good money with this model.

This company is only 3 years old, so we’re still growing, but our results today are two times that of any peer in the industry. That is shocking. Note to industry: There is a better model.

So what if other debt collection agencies start copying your model? Would that be a good thing? How will you adapt?

First, I hope they do copy my way. I’m not afraid of competition. We really think the world is a better place if we could get every debt collector to follow this model.

Secondly, we think there’s enough debt out there that we don’t’ have to worry about competition. If somebody catches up to us, that’s not their fault — that’s our fault. We’re first movers, and it’s our job to stay ahead.

You know a few things about losing money, as well as making money. Advice for those out there who may be facing down failures, business or otherwise?

Somebody once told me that failure is not final. I thought that was just another cute little cliché thing. I didn’t give it much shrift. But then I had the good fortune of failing a couple of times. And here’s what I found out: he was right. Failure is not final. It is an awkward, uncomfortable, anxiety-filled portion of your life; it is not your whole life. It isn’t who you are, it’s what happened to you, and once you get that distinction, then you realize, “I can change that. I can come back. I can do again.” Isn’t that was capitalism is all about? We have the freedom in America to try anything we want to, and most of them do not work. But entrepreneurs say, “I just want some of them to work.”

I really hope I end up being a role model for businesses and businesspeople who failed. Then I would look back at all of my failures and scuffed knees and bruised elbows and know it was worth it.

Hi, I'm Bill Bartmann and I am on a mission to reform the debt collection industry in America. Please join with me as we bring a petition to Washington D.C., and make Congress close all the legal loopholes in debt collection practices. It's time to stop these debt collection abuses and stop these criminals. Join with me! Sign the petition today! http://stopthesecriminals.com/petition

I’ve just received word from Thomas Hinton, President of the non-profit American Consumer Council, that they have selected CFS2 as the recipient of their 2013 Friend of the Consumer Award. Here’s what he said:

“The American Consumer Council is pleased to recognize CSF2 with its 2013 Friend of the Consumer Award for its commitment to helping a large segment of consumers get back on their feet through employment assistance and debt negotiation services. As a financial recovery company, CSF2 is offering valued services that millions of consumers desperately need as we emerge from one of the longest recessions in our nation’s history.”

Here’s the strange thing. While I’m grateful and my team certainly deserves to be recognized, my overwhelming feeling is one of frustration. Specifically, frustration that we’re not touching enough lives quickly enough. We can do even more …and we will.

Hi, I'm Bill Bartmann and I am on a mission to reform the debt collection industry in America. Please join with me as we bring a petition to Washington D.C., and make Congress close all the legal loopholes in debt collection practices. It's time to stop these debt collection abuses and stop these criminals. Join with me! Sign the petition today! http://stopthesecriminals.com/petition

In the through the looking glass world that is Washington, DC, competence, skill and expertise have little to do with those being approved to lead our government’s most important agencies.

The case of Richard Cordray, who’s had to be re-nominated to lead the consumer protection agency, he’s already been leading since its inception, is a perfect case in point.

Reporter John Michael Spinelli does a nice job of illustrating in his article just published today The Examiner. I’m pleased he chose to interview me for it as well, there’s a lot at stake with this nomination as it portends not just the future of one individual, but the protection agency itself.

Hi, I'm Bill Bartmann and I am on a mission to reform the debt collection industry in America. Please join with me as we bring a petition to Washington D.C., and make Congress close all the legal loopholes in debt collection practices. It's time to stop these debt collection abuses and stop these criminals. Join with me! Sign the petition today! http://stopthesecriminals.com/petition

Hi, I'm Bill Bartmann and I am on a mission to reform the debt collection industry in America. Please join with me as we bring a petition to Washington D.C., and make Congress close all the legal loopholes in debt collection practices. It's time to stop these debt collection abuses and stop these criminals. Join with me! Sign the petition today! http://stopthesecriminals.com/petition

The politics we typically get to see are “made for tv” pomp and posturing. The real politics are going on behind the scenes between key staffers empowered to negotiate on behalf of their elected bosses.

The “Fiscal Cliff” – a set of severe tax increases and across the board budgetary slashing – is set to happen at New Years Eve. Now that the election is over, Democratic leaders have vowed to stop “kicking the can down the road” and deal with our deficit issues once and for all. If a negotiated settlement is not reached by this deadline, the financial after-effects will be felt globally.

If you want to understand what’s REALLY happening I’d suggest you watch this fascinating interview by economist John Mauldin as he miraculously get’s two of the key staffers involved in the negotiations (David Krone, Chief of Staff, Senate Majority Leader Harry Reid; and Rob Lehman, Chief of Staff, Republican Senator Rob Portman) to share in a civil, thoughtful but blunt conversation about these negotiations. It’s riveting.

Hi, I'm Bill Bartmann and I am on a mission to reform the debt collection industry in America. Please join with me as we bring a petition to Washington D.C., and make Congress close all the legal loopholes in debt collection practices. It's time to stop these debt collection abuses and stop these criminals. Join with me! Sign the petition today! http://stopthesecriminals.com/petition

In my experience, those who seek political office usually come in two basic “flavors.” There are those who aspire to great power and influence; and those that aspire to serve.

The pleasant irony is that those who serve best are often the ones that end up with the most power and influence.

I believe there will be no better current example of this than the Massachusetts Senator Elect, Elizabeth Warren. Ms. Warren has gone from a middle class upbringing as elementary school teacher to respected Harvard professor and tireless crusader to reform Wall Street, in order to better protect the average American. She is today’s “Mr. Smith Goes to Washington.”

Even before she takes office she has sat down with me to work on debt collection problems. Our meeting could have been the typical perfunctory meeting politicians have all the time. It was anything but. What most people will never see or know is her level of engagement and desire to fix problems. You heard it here first, she is going to be a phenomenal and important Senator.

Though in the coming weeks we face the daunting “fiscal cliff,” I am steadfastly heartened and hopeful about our county’s future. With thoughtful, caring (and tough) people like Ms. Warren working on our behalf, I know everything is going to work out just fine.

Hi, I'm Bill Bartmann and I am on a mission to reform the debt collection industry in America. Please join with me as we bring a petition to Washington D.C., and make Congress close all the legal loopholes in debt collection practices. It's time to stop these debt collection abuses and stop these criminals. Join with me! Sign the petition today! http://stopthesecriminals.com/petition